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NLRB rules that employees are entitled to bring employment-related claims as class or collective actions, in court or arbitration proceedings

Legal Update

NLRB rules that employees are entitled to bring employment-related claims as class or collective actions, in court or arbitration proceedings

The National Labor Relations Board (NLRB)—the federal decision-making body that oversees relations between labor unions and private employers—recently declared that employees must be allowed to pursue their workplace grievances through collective or class-wide actions, whether it be through litigation or arbitration.

In D.R. Horton, Inc. and Michael Cuda, Case 12-CA-025764, the NLRB found that an employment agreement precluding workers from filing joint, class, or collective claims that relate to wage and hour violations and/or other working conditions violated Section 8(a)(1) of the National Labor Relations Act (NLRA). Section 8(a)(1) establishes that an employer cannot “interfere with, restrain, or coerce employees” who are exercising their Section 7 rights. Section 7 rights protect employees who are engaged in “concerted activities for the purpose… of mutual aid or protection….”

The agreement required workers to waive their right to file a lawsuit or civil proceeding. It required workers to exclusively submit all employment disputes and claims to final and binding arbitration. The agreement went on, and prohibited the arbitrator from consolidating claims, proceeding with a class or collective action, or awarding class-wide relief. The NLRB held that the agreement expressly prohibited employees from engaging in protected activity—by prohibiting employees from bringing collective and class claims in any forum. The Board cited precedent establishing that the filing of collective civil actions and class-action lawsuits is protected concerted activity, and must be allowed under the NLRA.

More importantly, the NLRB decided that its decision to invalidate an agreement that contains a categorical prohibition of joint, class, or collective federal state or employment law claims does not conflict with or undermine the fundamental attributes and policy behind the Federal Arbitration Act (FAA). The NLRB states: “To find that an arbitration agreement must yield to the NLRA is to treat it not worse than any other private contract that conflicts with Federal labor law.” The NLRA, landmark legislation passed in 1935 that gave workers the right to unionize and engage in concerted activity, trumps the more recent FAA.

If the decision is appealed, it will go to the D.C. Circuit Court, and the NLRB General Counsel will defend the NLRB’s decision.